Markets started the week with a bang as both the key indices, Sensex and Nifty, logged new intra-day peaks on Monday spurred by BJP's victory in Assembly polls but later succumbed to selling and ended in the red.

The Sensex opened strong at 21,416.67 and rose to an all-time peak of 21,483.74 after the BJP's poll win in three states sparked optimism about the main opposition party's chances in general elections next year.

Afterwards, the 30-share index encountered strong resistance and fell for the next four days. The BSE barometer lost 280.95 points, or 1.34 per cent, over the last weekend's close to settle at 20,715.58. The diversified index scaled historic closing high of 21,326.42 on Monday.

Speculation that US Federal Reserve may soon start cutting back on its stimulus programme, which has proved a boon for emerging markets, including India, and a host of domestic factors severely dented investor sentiment and led the market to snap a two-week rally.

The situation worsened further on Friday after weak factory output data and rise in retail inflation fuelled fears that RBI may hike key interest rates in its December 18 policy meeting.

The Sensex had gained 779.14 points, or 3.85 per cent, in the previous two weeks.

The NSE 50-share Nifty also rose to an all-time high of 6,415.25, but declined afterwards to 6,161.40 before ending the week at 6,168.40, showing a loss of 91.50 points or 1.46 per cent. The key index had gained 264.15 points, or 4.41 per cent, in the last two weeks.

Fall in the rupee value to two-week closing low of 62.12 against the dollar on Friday also weighed on the market. The market reacted negatively to hawkish comments on inflation from RBI Governor Raghuram Rajan as it triggered speculation that he will raise the key lending rate next week.

The Index of Industrial production (IIP) contracted 1.8 per cent in October as compared to an expansion of 1.96 per cent in September and 8.4 per cent a year earlier.

Inflation, as measured by the consumer price index (CPI), rose to a nine-month high of 11.24 per cent in November from 10.17 in October, making it harder for the Reserve Bank to lower interest rates at its upcoming monetary policy meet. Shares of power, capital goods, consumer durable, auto, banking and realty sectors were the main losers of the week, while IT and FMCG segments notched gains.